How to Dissolve an LLC in Colorado

Find out how you can go about dissolving an LLC in Colorado.

Closing your Colorado limited liability company (LLC) will involve a
variety of tasks. Among the most important are what is known as dissolving and winding up the business.

Dissolving Your LLC

Your
LLC is registered with the State of Colorado. Officially ending its
existence as a state-registered business entity, and putting it beyond
the reach of creditors and other claimants, begins with a formal process
called dissolution. While an LLC may be involuntarily dissolved
through a court decree, this articles covers voluntary dissolution by
the LLC members.

In order to voluntarily dissolve your LLC, you
first should look to your operating agreement. In most cases, it will
contain a section with rules for how to dissolve the company. Typically
the rules will require a vote of the LLC members on a resolution to
dissolve, and more specifically a requirement that some percentage of
members vote in favor of the resolution. Make sure you follow any
specific procedural requirements that may be part of the dissolution
rules, such as setting a specific time to meet and vote and giving
advance notice to all members regarding the meeting.

For
either approach to dissolution of your LLC—relying on rules in the
operating agreement or on unanimous member agreement—you should make
sure to record the decision to approve the dissolution in the official
minutes of the dissolution meeting or on a written consent form.

Statement of Dissolution

After
dissolving your LLC, you must file a statement of dissolution with the
Secretary of State (“SOS”). As a matter of law, the statement must
include:

the name of your LLC; and

the LLC’s principal office address.

You
will also need to provide your LLC’s state ID number. You can get some
idea of what a statement of dissolution contains by downloading the
sample form from the SOS website. However, Colorado requires that all
statements of dissolution be filed online using the state’s online filing system.

There
is a $25 fee to file the statement. Your online filing should be
processed immediately in real time. Be aware that your business name
will become available for use by others after dissolution.

Winding Up

Following
dissolution, your LLC continues to exist only for the purpose of taking
care of certain final matters that, collectively, are known as winding
up the company. You may choose to designate one or more LLC members or
managers to handle the winding up.

Under Colorado’s LLC Act, key winding up tasks include:

preserving the LLC’s business or property as a going concern for a reasonable time

disposing of LLC properties that will not be distributed in kind to members

discharging or making provision for discharging LLC obligations and liabilities; and

distributing remaining LLC property among members.

Note that it is particularly important that you pay all outstanding taxes.

Notice to Creditors and Other Claimants

One
other key task is giving notice to creditors and other claimants of
your LLC's dissolution. Giving notice is optional. However, doing so
will help limit your liability and also allow you to more safely make
final distributions to members.

Under Colorado law, one way to
give notice is by sending a written document directly to known claimants
after dissolution. Proper written notice must state that, unless sooner
barred by any other statute limiting actions, any claim against your
LLC will be barred if an action to enforce the claim is not commenced by
a deadline that is stated in the notice. The deadline may not be less
than two years after the delivery of notice.

You also may give
notice to unknown claimants by publishing in a newspaper. As with
sending direct notice to individual claimants, there are specific rules
for giving notice through publication. Generally speaking, claimants
have five years after the date of newspaper publication to bring a
claim.

There can be certain advantages to giving direct written
notice to individual claimants. In any case, if you choose to give
claimants notice of your LLC’s dissolution, you should strongly consider
getting assistance from a business attorney.

Tax Clearance

Colorado does not require that you obtain tax clearance before dissolving your LLC.

For
federal tax purposes, check the “final return” box on your IRS Form
1065 (if your LLC is classified as a partnership for tax purposes) or
IRS Form 1120 (if your LLC is classified as a corporation for tax
purposes).

Out-of-State Registrations

Is
your LLC registered or qualified to do business in other states? If so,
you must file separate forms to terminate your right to conduct business
in those states. Depending on the states involved, the form might be
called a termination of registration, certificate of termination of
existence, application of withdrawal, or certificate of surrender of
right to transact business. Failure to file the additional termination
forms means you’ll continue to be liable for annual report fees and
minimum business taxes.

Additional Information

You can find additional information, such as instructions for how to file online and filing fees, on the SOS website.

Final Advice: Dissolving
and winding up your LLC is only one piece of the process of closing
your business. For further, general guidance on many of the other steps
involved, check Nolo’s 20-point checklist for closing a business and the Nolo article on what you need to know about closing a business.